ISMA Pushes Back on Draft CAFE-3 Norms, Seeks Stronger Flex-Fuel Vehicle Incentives

The Indian Sugar & Bio-Energy Manufacturers Association (ISMA) has formally requested the Ministry of Power to reinstate stronger incentives for Flex Fuel Vehicles (FFVs) under the Draft Corporate Average Fuel Efficiency (CAFE-3) norms, citing concerns that the current draft's reduced provisions could dampen automotive industry momentum toward ethanol-compatible vehicles.

In its communication to the government, the apex industry body representing private and public sector sugar and bio-energy producers acknowledged ongoing policy support for ethanol-based transportation. However, ISMA expressed concern over the reduction of the Volume Derogation Factor (VDF), a key incentive parameter, in the latest regulatory draft, arguing that a weaker incentive structure may discourage automakers from accelerating FFV production.

India met its 20 percent ethanol blending target ahead of schedule, a milestone backed by sustained policy interventions and substantial investments from sugar mills and grain-based distilleries. ISMA noted that with ethanol production capacity now significantly exceeding current blending requirements, expanding the flex-fuel vehicle ecosystem represents the most direct pathway to absorbing the surplus, while simultaneously supporting rural incomes and ensuring stable returns for farmers.

The association also highlighted ethanol's role in reducing India's dependence on imported crude oil, contending that FFVs can contribute meaningfully to building resilience against geopolitical disruptions in global energy markets. ISMA noted that the ethanol programme has already demonstrated tangible gains in foreign exchange savings and in ensuring prompt payments to farmers through the supply chain.

Among its specific proposals, ISMA called for restoring earlier incentive levels under both the Carbon Neutrality Factor (CNF) and VDF provisions to maintain industry confidence. The body also recommended incorporating emerging vehicle technologies, including FFV-Plug-in Hybrid Electric Vehicles (FFV-PHEV) and FFV-Range Extended Electric Vehicles (FFV-REEV), within the regulatory framework to ensure long-term adaptability.

ISMA further urged the timely notification of the CAFE-3 norms, stressing that regulatory clarity is essential for automakers, investors, and ethanol producers planning future commitments. The association stated that a stable, forward-looking policy environment is necessary for aligning India's transportation transition with its broader goals of energy security, environmental sustainability, and rural economic development.

The Ministry of Power has not yet issued a public response to ISMA's letter. The CAFE-3 norms, which govern fuel efficiency standards for passenger vehicles in India, are currently in the draft stage and subject to stakeholder consultation before final notification.